‘Worst calendar year performance’ for U.S. institutional plans since 2008: report

Institutional plan sponsors lost a median of 3.8 per cent in 2018, as losses in the fourth quarter of the year dragged down returns, according to new data by Northern Trust Corp.

The Northern Trust Universe, which tracks the performance of about 300 large U.S. institutional investment plans with a combined asset value of about $925.7 billion, found the median plan lost 6.6 per cent in the quarter ending Dec. 31, 2018.

In particular, U.S. equities turned sharply negative in the quarter, with the median U.S. equity program losing almost 15 per cent during the period. Wiping out gains of 3.3 percent at the median through the third quarter, the fourth quarter of 2018 resulted in the worst calendar year performance for plans in the universe since a nearly 25 per cent loss in 2008 during the global financial crisis.

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“Institutional plan sponsors benefited from a long run of positive performance by U.S. equities since the financial crisis ended in the second quarter of 2009, but equity markets have been significantly more volatile in the past year,” said Mark Bovier, regional head of investment risk and analytical services at Northern Trust, in a press release.  

“U.S. equities were the driver of fourth-quarter losses and had a significant impact on long-term investment results as well. For plans in the Northern Trust universe, the median annualized return since the end of the financial crisis dropped 100 basis points — from 10.8 per cent as of Sep. 30, 2018, to 9.8 per cent as of Dec. 31, 2018 — due to fourth-quarter performance.”

The report also found the median total fixed income program was up 0.6 per cent in the final quarter of 2018. Alternative asset classes were mixed — the median private equity program gained three per cent, the median hedge fund program lost about five per cent and the median real estate program was up 0.3 per cent. The median total equity program — U.S. and international — lost 13.2 per cent in the quarter. 

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